Which of the Following Is a Reason That Makes NPV

question 114

Multiple Choice

Which of the following is a reason that makes NPV a better approach to capital budgeting on a purely theoretical basis?

• A) It measures the benefits relative to the relative amount invested.
• B) The reinvestment rate assumed by this method is reasonable.
• C) Financial decision makers are inclined to higher rates of return.
• D) Interest rates are expressed as annual rates of return.

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Definitions:

Cash Payments

Transactions that involve the transfer of cash from one party to another, often for goods or services.

Cash Balance

The amount of money on hand and in bank accounts, reflecting a company's liquidity.

Direct Labor Cost

The expense incurred by employing workers to produce a product or provide a service, excluding indirect costs such as supervision and administration.

Direct Labor

The wages paid to workers who are directly involved in manufacturing products or providing services.